Correlation Between Volatility Shares and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Volatility Shares and Northern Lights at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Volatility Shares and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volatility Shares Trust and Northern Lights, you can compare the effects of market volatilities on Volatility Shares and Northern Lights and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Volatility Shares with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volatility Shares and Northern Lights.
Diversification Opportunities for Volatility Shares and Northern Lights
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Volatility and Northern is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Volatility Shares Trust and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and Volatility Shares is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Volatility Shares Trust are associated (or correlated) with Northern Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Lights has no effect on the direction of Volatility Shares i.e., Volatility Shares and Northern Lights go up and down completely randomly.
Pair Corralation between Volatility Shares and Northern Lights
Given the investment horizon of 90 days Volatility Shares Trust is expected to generate 12.61 times more return on investment than Northern Lights. However, Volatility Shares is 12.61 times more volatile than Northern Lights. It trades about 0.1 of its potential returns per unit of risk. Northern Lights is currently generating about 0.07 per unit of risk. If you would invest 1,361 in Volatility Shares Trust on August 24, 2024 and sell it today you would earn a total of 5,057 from holding Volatility Shares Trust or generate 371.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 71.98% |
| Values | Daily Returns |
Volatility Shares Trust vs. Northern Lights
Performance |
| Timeline |
| Volatility Shares Trust |
| Northern Lights |
Volatility Shares and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volatility Shares and Northern Lights
The main advantage of trading using opposite Volatility Shares and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volatility Shares position performs unexpectedly, Northern Lights can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Northern Lights will offset losses from the drop in Northern Lights' long position.| Volatility Shares vs. Grayscale Bitcoin Trust | Volatility Shares vs. Amplify Transformational Data | Volatility Shares vs. Siren Nasdaq NexGen | Volatility Shares vs. First Trust Indxx |
| Northern Lights vs. Northern Lights | Northern Lights vs. Northern Lights | Northern Lights vs. ETF Series Solutions | Northern Lights vs. Mairs Power Minnesota |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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